Portland, Ore.'s Citywide ERP Shows They Don't Come Easy

The challenges and rewards of implementing enterprise resource planning (ERP) are exemplified in Portland, Ore.'s quest to replace decades-old technology.

If there's one truism that can be attributed to enterprise resource planning (ERP) projects, it's this: They're hard. They're hard to plan, they're hard to predict, they're hard to manage. But with the right combination of committed leadership and skilled work force, plus a little good luck, the grueling work of ERP implementation can pay off.

Such was the case for Portland, Ore. When the time came to overhaul the city's decades-old back-end technology, everyone knew it wouldn't be easy. But no one anticipated how difficult it would become.

Portland aimed to completely replace its systems for financials and logistics, capital projects, HR and payroll. The city's experience offers an inside look at the complexities involved in major legacy replacement projects. Portland's story also provides lessons for jurisdictions contemplating ERP deployments, as delays and technology integrator changes cast doubt on whether the project would succeed. Yet the city persevered and built itself an IT foundation that will last well into the future.

'70s Tech

Ken Rust, Portland's chief administrative officer, was all too familiar with the inadequacies of the city's old systems.

"I always like to refer to it as late-'70s technology the city implemented in 1991 and ran for 18 years," said Rust. Portland used mainframe technology to manage its financial system. Human resources was a separate process. Reports were delivered in a batch format so massive the papers had to be wheeled around on carts. In fact, everything was paper-based. There was no online component to speak of. And over the years, hundreds of unauthorized "shadow" systems sprang up to compensate for the mainframe's shortcomings.

Perhaps the single biggest problem with Portland's mainframe system was that there was no single source of truth.

"If there was any decision-making information that was needed, you could end up with competing numbers because there was no one source of data," said Jennifer Sims, Portland's chief financial officer and executive director of the ERP project. "We were certainly ripe for some change here.

Photo: Jennifer Sims, chief financial officer, Portland.

That change had been suggested as far back as 1999. Even then, the technology implemented in 1991 was showing its age. As the 20th century ended, interest in public-sector ERP implementation grew. City officials at the time launched a needs assessment to examine the city's existing back-end technology. Working with the Government Finance Officers Association (GFOA), city staff members created a report that laid out the business case for moving to an ERP environment. Yet in 1999, Portland, like most other entities, had a different technology concern on its plate - Y2K.

Y2K readiness took precedence over the needs assessment report, Rust said, and the city shelved the report for years. Only in 2003 did Portland's Office of Management and Finance (OMF) take another look at ERP.

"My predecessor understood the inadequacies of the system," Rust said. "We brought GFOA back in, we updated that needs assessment, determined the business case was stronger, the ERP product had matured, and all the Y2K issues were behind us. That became the framework to bring something to our City Council in July 2004. The Council green-lighted it in 2004 with an initial budget."

The plan presented to the Portland City Council called for a two-phase implementation. First would be analyzing business requirements and selecting software; second would be the actual technology integration. The OMF was careful to build in the option of choosing different vendors for phase one and phase two, a move that proved particularly prescient.

Portland chose Accenture to handle phase one, but the company's bid for phase two was more than the city wanted to pay, according to Rust. Instead,

Portland hired San Diego-based Ariston Consulting & Technologies Inc., which was acquired by Black & Veatch, a global engineering, consulting and construction company, to integrate the SAP software the city had chosen as its ERP platform.

The plan called for Portland to go live with SAP financials and logistics in early 2008, to be followed later in the year with the human capital management element. But things didn't go as anticipated.

"During the implementation and the configuration period, we really ran into some issues. In late 2007, we determined we weren't going to make the go-live date of January 2008." In 2008, the city replaced Ariston as the integrator for phase two. "It wasn't an easy decision and not the way we planned it. We reached a point where we believed we needed a different firm to help, and decided it was in our best interest to make that change. We worked out an orderly transition that minimized impact on the project. While I'm sure it was a disappointment to the first firm, I think we all worked collectively to make it work as well as possible, given it wasn't the ideal condition."

Take Two

Besides needing to find a new project partner, the city had begun to learn disturbing details about the patchwork IT back end it was replacing. Along with hundreds of shadow financial systems, the city uncovered procedural and organizational shortcomings that would greatly complicate the deployment.

For instance, some union contracts hadn't been consistently implemented and some unwelcome practices had crept into the bargaining process. Reviewing contract provisions, determining proper application of rules and gaining agreement on those issues proved to be "very cumbersome," Sims said.

The project also revealed just how decentralized Portland's IT operations were. The ERP project was intended to unify 7,000 city employees working in 26 bureaus in 75 locations. The whole endeavor, it seemed, was growing more difficult and time consuming than the initial estimates predicted.

"It revealed a lot of our weaknesses that had developed and become institutionalized over a long period of time," Rust said. "Cleaning that up was extremely time consuming and took a lot more effort than we ever expected."

With Ariston out and problems mounting, Rust and Sims brought in SAP Public Services for the integration, configuration and implementation. By then, the launch dates had been pushed back nearly a year and fatigue was starting to set in among project staff.

These setbacks gave way to another set of problems - keeping the City Council informed and onboard, and keeping employees motivated. As the project's executive sponsor, it was up to Rust to stay the course. His strategy was to ensure that he had access to the city's best. One of them was Sims, so Rust took over her duties so she could commit to the project full time.

"They always say you need to bring your best and brightest to these things, and that's absolutely true," Rust said. "You can't send the B-team. It has to be your A-team. Organizationally you have to figure out how to bring in the right people while continuing the day-to-day work that goes on. A lot of the folks on the A-team were in my operation, in finance and HR. So I just simply had to make it a requirement that they'd be on the team, and they didn't have much choice."

Sims noted that to keep people motivated, the city had little to offer as incentives. She came up with a modest solution, however, for employees who had been pulled from their regular duties to work full time on the project.

"The one thing people complained about is they didn't get to use vacation [during the project]," Sims said. "So we let them carry it over when normally it would expire. And that

was about the only thing we were able to give them, which is kind of sad."

Over the Hill, Into the Valley

Rust and Sims worked to shore up City Council and employee support, then buckled down to work with their new implementation partner. SAP executives said Portland maintained strongly committed to the project, despite the difficulties.

"It really took unprecedented consensus-building on their part," said Rich Beggs, SAP's director of state/local government and education. "The commission form of government [in Portland] is five council members who essentially act as managers. The mayor is not one who can just dictate; they have to form a consensus. So we were quite impressed with the leadership of the city. They were able to make sure we had everybody onboard. We were also able to make sure they were very business-driven."

Things finally started to click for Portland. The new go-live target dates were eventually met. The software modules were planned to deploy in two stages. The financials and logistics piece went live in November 2008 and the human capital management piece in June 2009.

There were additional challenges along the way, but the hurdles the city faced the second time around didn't catch it off guard.

"This project touches the entire city," said Harish Luthra, vice president of professional services at SAP Public Services. "The leadership has to make sure the key stakeholders from each department are engaged. The city did a really good job of that, and that helps in change management and adaptation of the system as well. Going through a change in system like this can be equivalent to a corporate root canal. If you have the key stakeholders engaged, if you are doing the right things from a change management and training perspective, that root canal essentially becomes a dental cleaning. It's still painful, but much less so."

With the technology integration behind it, Portland is starting to realize the benefits of citywide ERP. But the realization process will be slow. Because Portland split the deployment into two phases, city employees must wade twice through the so-called "Valley of Despair" - a term used by consultants to describe the period after a technology switchover when organizations struggle to learn new rules and processes. Generally the larger the project, the longer it takes to escape the valley.

Portland employees marching through the first-phase valley can see the end. Unfortunately the respite will be short-lived.

"We're coming out, a year later, from the phase one Valley of Despair," Sims said. "I talk to people almost every day who tell me how happy they are. They are getting comfortable with it and are getting value from it. But we're still in the valley with phase two, which included payroll. But it takes a long time to get everyone on track with using the system and then driving efficiencies with it."

Still, the project's fundamentals appear sound: Bills are getting paid; employees are getting paychecks; and most importantly, to Sims at least, there's finally a single source of truth for all city financial data. Not to mention the city automated the 25,000 or so pages of procurement documents in the old system. And like any technology deployment, it's people who make it work - and make it hard.

"Whether it's ERP or anything, we have a saying around here: 'There are no problems except people problems,'" Rust said. "People are critical to the success of anything you're trying to do. When you have new technology, a huge change effort, huge training demands, limited ways to incent people or reward them, it's a huge challenge. Ultimately there were enough good people and enough of a sense of the

common vision that we got through that."

Although the city government now can look back with pride at its accomplishments, the future may be the real test.

"Check with us in five years and see how well we've used the system to improve the business of the city of Portland," Rust said. "We've been successful, but the real potential is just beginning to be seen."